It’s Back To The Future In California
The Modesto Bee reports from California. “A 133-unit condominium project across the street from California State University, Stanislaus, is in danger of falling through, leaving investors in the lurch. The landowner, Modesto attorney Ralph Ogden III, said low-income apartments are one of five or six options being discussed. ‘In the end, (condos) aren’t economically viable,’ Ogden said.”
“That leaves investor Michael Chadd, who borrowed to invest with Strategic Investment, very, very unhappy. Chadd bought a $100,000 stake in the condo plan. For the last nine months, he’s watched his money slowly drain away. What Chadd didn’t see and Strategic Investments didn’t mention was the sour state of the residential building market.”
“‘We were all pretty stupid,’ Chadd said.”
“It’s back to the future in the Northern San Joaquin Valley as median home prices have plummeted to 2004 levels. Stanislaus County’s median-priced homes sold for just $300,000 last month. That’s lower than during November 2004, when the region’s housing market was booming. In the last 12 months alone, Stanislaus’ prices have dropped nearly 19 percent.”
“Merced County is even worse. Prices there plunged nearly 26 percent to $260,000 in September compared with a year earlier. That’s the biggest decline in California, according to DataQuick.”
“Home sales volume has sunk to levels not seen since the region’s mid-1990s recession. Only 372 homes sold this September in Stanislaus County. In September 2005, more than 1,400 homes sold in the county. Back then the region was in a housing boom.”
“These days, it’s foreclosures that are booming. Last month, 268 homes were repossessed by lenders at foreclosure auctions on Stanislaus’ courthouse steps.”
The Sacramento Bee. “Lena Abello, her brother and two friends stood poised to buy their first home together last month – a $303,000 single-family house in Natomas. But the shake-up in the nation’s mortgage industry abruptly shuttered their dream.”
“‘The day before we were to open escrow, my lender called and said the program we were about to qualify through was no longer available,’ said Abello. ‘She said we were no longer approved for a loan.’”
“‘The products we used – the creative financing, so to speak – are pretty much gone,’ said Jon Dobbel, Elk Grove branch manager for Gold River-based Summit Funding. ‘It definitely has an effect on people’s ability to buy houses.’”
“Prices have fallen across the region as the supply of homes for sale continues to exceed the number of willing buyers. Sacramento real estate agent Rosanna Garcia attributed September’s downturn ‘to people not qualifying because the lenders have become so strict. It’s also still about fear,’ she said. ‘How much more is it going to drop? Am I going to be overpaying?’”
“Abello and her partners had hoped to buy together what they couldn’t afford separately. That turned out to be a four-bedroom, 1,800-square-foot house in Natomas owned by a San Francisco real estate agent. The long-range plan was to get their feet in the door as homeowners and ‘use real estate to build and create wealth.’”
“But that plan is now on hold. ‘I had to call the (San Francisco) owner and tell her the bad news,’ Abello said. For now, she and her friends will remain renters.”
The San Francisco Chronicle. “Bay Area homes sales sank to a two-decade low in September, as tighter lending standards walloped an already-declining market. It was the slowest September since DataQuick started recording statistics in 1988 and the 32nd consecutive month of declining sales.”
“‘I had an offer come in on a property in Oakley that was a probate sale,’ said Don Forrester, a Realtor in Walnut Creek. To show comparables to his client, ‘I pulled up 30-something (nearby) homes at that price level of $356,000. Eighty percent were bank-owned foreclosures or short sales. That was huge.’”
“Forrester said the price impact was clear: ‘A year ago, (that property) would have gone for $400,000. A year and a half before that, it was $450,000.’”
“Rising inventory levels are another factor that impact sales. The number of for-sale homes in September rose in seven Bay Area counties compared with a year ago, according to MLS data compiled by ZipRealty.”
“At the same time, every Bay Area county had a significant chunk of its listings showing price reductions, ZipRealty said. Price reductions ranged from 25 percent of San Francisco listings to 54 percent of Solano County listings. That doesn’t include homes that were removed from the MLS and then relisted at a lower price, a controversial but common practice.”
“Oakland officials and advocacy groups announced a set of resources and legislative initiatives Thursday aimed at fighting the subprime mortgage mess.”
“Dorothy Hicks said she is on the verge of losing her home in the Havenscourt neighborhood of Oakland. Hicks said predatory lending practices forced the monthly mortgage payments on the home she has owned for 39 years well above $3,100. Hicks said she attempted to pull equity out of her home to start a discount children’s uniform business.”
“With prepayment penalties and high fees, Hicks said she now owes $412,000 on her property. A few years ago, the principal on the loan was just over $20,000. ‘A lot of people will tell you, ‘You knew what you were signing,’ Hicks said. ‘That is not so.’”
From ABC 30. “There are new signs of just how hard the mortgage meltdown is hitting the Bay Area as the latest data shows home sales in Northern California have sunk to the lowest level in two decades.”
“In Contra Costa County, realtor Lynda Bartels says these days, a lot of folks are looking at homes, but not necessarily buying. ‘I think buyers are worried. They want to get a home as low as they can, but at the same time inventory is up and there’s lots to choose from.’”
“The Bay Area housing slump is hitting realtors hard. Bartels’ profits are down 80 percent in the last two years and developers are also trying to unload leftover homes that just won’t sell. ‘The business decision is more of an advantage to sell at a discount and lose money than wait 12 months on a market that might improve,’ says Bartels.”
“The Cerrita Gated Community in Pinole has seven, 3-bedroom, 2-bath homes that will sell at auction next month. Opening bid is $385,000 dollars — nearly half of the asking price.”
“‘I wouldn’t be in a hurry to buy. You can wait over 6-months, a year, even two years, and we’re still going to see those lingering effects,’ says Thomas Davidoff, U.C. Berkeley Haas School Of Business. ‘For the inner Bay Area the worst is yet to come, and it’s going to be best for buyers.’”
The Marin Independent Journal. “Late summer’s credit crunch continued to plague the housing market in September, time-warping Marin’s median single-family home price back to what it was a year ago.”
“The median single-family home price in Marin in September was $860,000, just shy of the $863,500 in September 2006, according toDataQuick. The median single-family home price in August was $1 million.”
“‘September was a really difficult month in Marin,’ said Valerie Castellana, president of the Marin Association of Realtors. ‘The total sales dropped dramatically, more than we’ve seen in recent years. The segment of the market that is most hard hit are properties under $1 million.’”
“‘I think it’s a correction that’s happening that was due,’ said Bruce Berlinger, an agent in Tiburon.”
The Brentwood Press. “It’s no secret that California’s red-hot real estate market has cooled considerably over the past few years. With property values and home prices on the decline and bank foreclosures at an all-time high, local Realtors and their clients have been forced to change the way they approach a deal.”
“Currently there are approximately 3,000 homes for sale in East County, nearly 43 percent of which are bank-owned foreclosures, according to local Realtor Brian Sharp.”
“‘Yes, it is a crazy market right now, and so the one thing you really need to stress is how to help. Half the properties are in foreclosure and people’s loans are upside down, so my job is to find a way to help them,’ said Joy Di Ricco, a Realtor in Antioch.”
“Mark Christopulus of M&H Realty in Brentwood also has managed to stay busy during the downturn, thanks in part to his expertise in dealing with foreclosures.”
“‘What’s hurting the market right now is that banks are taking foreclosures and selling them for under market value because they want to move them,’ he said. ‘What I’ve been doing in this market is taking on foreclosures from the bank and taking the listing and trying to sell them.’”
“So what’s a homeowner to do? Sit tight if you can, and wait for the market to settle, advised Brian Sharp of Sharp Realty in Brentwood.”
“‘I’m telling clients not to buy right now if they don’t have to,’ he said. ‘Uncertainty kills the market, and I believe in the last couple of years greed and bad loans have contributed to the decline of the market, and buyers are scared. What I’m seeing a lot of right now are short-sales. Things are definitely slow.’”
“In Brentwood, there are currently 600 homes for sale. Sharp said 20 homes were sold in September, and there are approximately 10 houses pending for October. He said that home prices have shot up faster than incomes were able to keep pace, and thus ‘everything is out of whack.’”
“What people need to be careful of, he added, are those who are painting a rosy picture that currently doesn’t exist.”
“‘There is a very small group of unethical behavior out there right now, telling people to buy and sell regardless,’ said Sharp. ‘I say: do your job, serve your clients, but have some integrity. That’s the bottom line.’”
‘The median single-family home price in Marin in September was $860,000, just shy of the $863,500 in September 2006, according toDataQuick. The median single-family home price in August was $1 million.’
I recall they were really celebrating that one million mark. It sisn’t last long!
‘Businesses searching for office space in Carlsbad have plenty of choices, according to the latest report from Burnham Real Estate. Leasable office vacancy rates in the posh coastal city have risen to 24.2 percent in the third quarter, the report stated. That’s up from 21.2 percent in the second quarter and just 10.2 percent in the third quarter of 2006.’
Here is an alternate link to the Brentwood article, as it may have a problem displaying.
Carlsbad is “posh”? When the heck did that happen? That and Oceanside used to be dumps when we drove through there when I was a kid.
I think POSH Carlsbad is short for:
Piece Of S#$T Homes of Carlsbad.
Carlsbad is home to La Costa and not far from Rancho Santa Fe & La Jolla. Generally considered high end.
Does Roger Decoster still race there?
http://www.youtube.com/watch?v=s2PFBcwtM_s
Oceanside is blue collar, but Carlsbad is very clean and pretty.
Oh get over it. Carlsbad is mostly NEW. Think Ranho Castillo/Palomar Airport Rd. La Costa/Aviara was built in the last 10-12 years. The “old’ neighborhood on the west side of I-5 is still called the barrio. And let’s see there is that mobile home park on the coast highway and the power plant as well. I’m not saying it’s like parts of O’side but “posh”? It doesn’t compare to La Jolla and it ain’t no Rancho Santa Fe either. “New” Calrsbad is where some of the most annoying yuppies in North County reside…sorry off on rant
Um yeah….That’s Rancho CARRILLO as in Lou….
Well, I think Carlsbad is pretty, anyway.
Just like Agrestic…..
LOL!
Also known as Agoura…
No, no– Agrestic is Simi Valley. I had to work out there today and they are building like crazy, still! I saw houses going for well over a million $ in freakin Simi!Yipes! The tune-’little boxes’ kept rolling around in my head.
I’m actually reminded of this quote anytime I see something on Marin. I’m not really sure how the price decline will be ultimately calculated, but according to this snapshot, we are halfway there. Someone may want to check LAY’s pulse.
“It’s God’s country, what can I say,” Leslie Appleton-Young, chief economist for the California Association of Realtors, told an audience of agents Tuesday in Terra Linda. “When is the 30 percent decline in Marin County’s market going to happen? Not in my lifetime.”
LAY will have all manor of excuses when the 30-50% declines actually come to pass….that “no one could foresee this coming” (credit crunch, Chinese contagian , bond market, job losses, recession, etc, or all of the above!).
LAY is just a Gary Watts with a dress and lipstick.
Didn’t Marin values correct at least 30% in the 90’s? This means that Ms. Applesinmy-Bung is about 10 years old? I suppose that can be supported by the 5th grade grasp on markets and finance…
I’ve mentioned the commercial space in CBD before. No idea what they were expecting to come in, but they were building massive amounts of tilt-ups & various commercial spaces. It’s a bit creepy in some places (along Palomar Airport Rd., for the locals).
Also, lots of “for lease” signs in the strip malls.
Commercial looks to be little better than residential in this area, IMHO.
“I recall they were really celebrating that one million mark.”
Wasn’t that around when the DJIA cleared 14,000?
Wow. Just how many people are this far underwater? The quote above made my jaw drop.
Adam,
Note that “Dorothy Hicks [took an unspecified amount of equity] out of her home to start a discount children’s uniform business.” So, it’s not like the $20K grew out of control on its own; we’re missing a little information in the middle.
At least she was trying to do something constructive with the money. The FBs who really get to me are the ones with the Hummers & big screen TVs who cry that they were “victimized”.
The best thing about that is is they [think] they can simply sell the Hummers and big screens if need be. Guess what? Hummers and $50,000 ski boats will be a dime a dozen. SUCKERS!!
$400K to start a discount uniform biz off the ground? Methinks she omitted several other things that she did with the money. She needed a Hummer to lug all of the fabrics around.
Ignorance isn’t an excuse. If you don’t know what you are signing and they didn’t hold a gun to your head, you have no recourse unless it was outright fraud (i.e. they later changed the terms to ones she never agreed to in writing).
That’s not quite true. The drafter of a contract holds responsibility for making sure the contract is clear. If a judge reads the contract and decides that it is unclear to the intended audience, then the judge has to decide against the drafter of the contract.
I haven’t seen one of these contracts, so I don’t know whether they qualify as being “clear” or not. Any ambiguous wording, internally inconsisten references, incorrect grammar/syntax, or nonvernacular terms may qualifyer the lender to skip out (but still lose the house).
I mean “may qualify the borrower to skip out”
If a judge reads the contract and decides that it is unclear to the intended audience
there was a saying where I grew up “the law doesnt protect fools”
we as a county should adopt such methods, anyone who signed on the dotted line, any lender who gave out shitty loans, investor or some other dipsh!t who bought these loans should bear the consquences of their own actions.
enough of this bullshit(everyone is a victim or didnt do it or I dont know or NO SE (sp?), this country is going down the drains.
I wonder why she just didn’t take out a SBA loan.
Why, at that age, did she re-mortgage her primary residence???
Why did she not have an atty to examine the docs at signing? Only 1 hour of atty time @$250/hr (for example).
The reporter did not do enough investigation/questioning.
~Misstrial
A lot of people will tell you, ‘You knew what you were signing,’ Hicks said. ‘That is not so.’”
I wonder if Hicks had an epiphany and realized what she just said. Maybe that is the problem - you didn’t bother to familiarize yourself with the contract for the biggest purchase you will ever make.
What a fool!
Yeah, somehow I don’t think that will hold up in court, unless there’s more to the story.
I’m I was about to take 400K to start a business, I’d have an attorney somewhere to help me.
The fact she didn’t have an atty may work in her favor actually. I wouldn’t be surprised if a lot of the contracts were voided. They shouldn’t be, but courts can get political too. Esp if ACLU etc get involved.
Comment by Misstrial. Amen to that. The bigger story is probably how she got scammed by the business propositioner.
“wonder why she just didn’t take out a SBA loan.
Why, at that age, did she re-mortgage her primary residence???”
The way to launch a business is with money borrowed from commercial banks, loans from extended rich family members
(Korean way), or from interested outside investors. NEVER, NEVER USE YOUR PRIMARY HOUSE TO BORROW CAPITAL TO LAUNCH A BUSINESS VENTURE.
i CAN START A BUSINESS WITH INITIAL START UP COSTS AS LITTLE AS SEVERAL THOUSAND DOLLARS. USING MONEY BORROWED VIA CC’S,FRIENDS , RELATIVES, SBA, OR JUST LEASE EVERYTHING. HAVE EXPERIENCE IN THIS KIND OF THING, AND THE LAST THING I WILL DO IS GET AN OVERPRICED OVERSOLD HI-FEE WELL-KNOWN FRANCHISE FOR SEVERAL HUNDRED THOUSAND DOLLARS. THESE ARE MONEY MAKERS FOR THE FRANCHISOR, NOT YOU.
ACTUALLY I DO HAVE A SMALL DBA BUSINESS VENTURE which is i/c Couriering Delivery. My main capital investment is my truck, which was financed through Toyoya Corp.
if i really wanted to get a business which i really liked and have the talent for it would be a pizza business. I would look for an owner who wants to sell cheap or just start up myself opening a small storefront, put in some kitchen equpiment, stock it and thats it. No Borrowing on my home, period! could do it with as little as $10,000 start up costs. Hard work and 7 days a week running a small business like a pizza parlor not my style but have been there- done that.
SBA requires something resembling a business plan. Which means the potential business “tycoon” has put a modicum of thought into the likelihood of the business succeeding and can demonstrate that likelihood - at least on paper.
The SS Subprime sinks into the ooze…
I guess the loan contract this woman signed was written in Greek since she did not understand a word of it.
I shutter to think what will happen to this country if dumbells like her are bailed out.
Perhaps you shudder?
Shutter is the greek spelling.
“Lena Abello, her brother and two friends stood poised to buy their first home together last month – a $303,000 single-family house in Natomas. But the shake-up in the nation’s mortgage industry abruptly shuttered their dream.”
“‘The day before we were to open escrow, my lender called and said the program we were about to qualify through was no longer available,’ said Abello. ‘She said we were no longer approved for a loan.’”
The luckiest day of these people’s lives and they don’t know it!
Yet…
Ah, but there’s proof that the Koolaid is still flowin’ -
“The long-range plan was to get their feet in the door as homeowners and ‘use real estate to build and create wealth.’”
Took the words right out of my mouth.
My gawd I almost puked when I read that. Sounds like a line they stripped right from a Carleton Sheets or Russ Whitney. Blech!
I came in here to say exactly the same thing. Amazing how weepy these people are over not becoming an FB.
Is it me, or does there seem to be an air of anger and resentment on the part of a lot of FB’s directed toward folks like us because we refuse(d) to fall in lockstep with the ponzi scheme that they are now trapped in?
No, I don’t want to buy your overpriced POS house. You bought it, you deal with it. Losing a metric a$$load of money on it? Boo frickin hoo. You weren’t crying when you drove the price up through the stratosphere and prevented people who actually wanted to buy a place to LIVE in from getting a place.
As cartman said, “mmmm let me lick your tears. Your tears are so delicious…”
“mmmm let me lick your tears. Your tears are so delicious…”
So brutal….and at the same time, so friggin’ hilarious.
Of course they were disappointed. The lender decided to not do the 100% (or 80/20) full loan for them. Now they don’t have a house to live in and default 6 months later like all of their friends. It’s about time the lenders start applying some common sense to their business.
exactly! I just read a story in our local paper about a woman (just a normal, hard-working person, who really isn’t a sap) who can’t afford housing in our community…she can only really “afford” (thank god she understood “affordability”) about 160K, and there’s nothing like that here. The whole tone of the story was “people are entitled to the American Dream of owning a home”….and they can’t here and it’s somehow the fault of “expensive materials” that make homes expensive in this area.
Then the article ends with some crap about the NAR and the local college are going to have a $125 per head seminar to “discuss” the alternatives to unaffordable housing. Hilarious.
I’m going to call this woman up and congratulate her and tell her to go rent a dream house and visit this blog.
Similar thing happened to my sister and her husband earlier this year. They were determined to buy despite attempts from numerous people to talk them out of it, the sale fell through when they were late on part of the deposit and the seller receieved a higher offer. The best thing that ever happened to them. Sometimes you just get lucky.
“…the sale fell through when they were late on part of the deposit and the seller receieved a higher offer.”
Money talks, and bull$hit walks!
Mark, is that you?????
I cringe everytime I hear about non-married people buying a house together. Just so many ways it can go wrong. Two 20-something young ladies bought a condo down the street from where I live back in 2004. I noticed the For Sale sign up recently and chatted with them. One of ‘em is getting married and will be moving in to her new husband’s place, and the other can’t afford the place on her own. Now they’re (trying) to sell in a depressed market where similar units in her building were on the market for $50k less than what they bought for (and even those didn’t sell).
I’ve got some friends who are in this boat, too - bought a place with a buddy, or whatnot. No problems for them yet, thankfully, but buying a place with a friend is like playing financial Russian roulette.
Lets see.
Young 20’s,
Condo owner,
As long as she is “cute” she has absolutely nothing to worry about!
What makes you think being married is any guarantee?
If FOUR people pooling their resources need a special loan program to buy a $303K house - maybe they shouldn’t be buying a house!
Let’s face it. The bubble popping is largely about removing the enablers who were willing to put people into death loans as long as they could do so regardless of whether it made sense. Welcome back credit standards.
Amen!
“Lena Abello, her brother and two friends stood poised to buy their first home together last month – a $303,000 single-family house in Natomas. But the shake-up in the nation’s mortgage industry abruptly shuttered their dream.”
Oh, well, better luck next time.
“So what’s a homeowner to do? Sit tight if you can, and wait for the market to settle, advised Brian Sharp of Sharp Realty in Brentwood.”
Sit tight, for what?
Houses will start selling again, but it will be a L O N G time before we see current price levels again.
If you need to sell, the price you can get today (even if it is much lower than you could get last year) is the best price you are going to get for a while.
Brian Sharp ……perfect name…..can join his clients sitting tight on a rented Joshua Tree. ‘Ouch Ouch…..are we done waiting yet Brian?… ouch ouch!’
Actually, it sounds like he’s a decent guy from his other comments.
“‘I’m telling clients not to buy right now if they don’t have to,’ he said. ”
“He said that home prices have shot up faster than incomes were able to keep pace, and thus ‘everything is out of whack.’”
“What people need to be careful of, he added, are those who are painting a rosy picture that currently doesn’t exist.”
“‘There is a very small group of unethical behavior out there right now, telling people to buy and sell regardless,’ said Sharp. ‘I say: do your job, serve your clients, but have some integrity. That’s the bottom line.’”
“best price you are going to get for a while” =
best price you are ever going to get in 2007 dollars
“Dorothy Hicks said she is on the verge of losing her home in the Havenscourt neighborhood of Oakland. Hicks said predatory lending practices forced the monthly mortgage payments on the home she has owned for 39 years well above $3,100. Hicks said she attempted to pull equity out of her home to start a discount children’s uniform business.”
“With prepayment penalties and high fees, Hicks said she now owes $412,000 on her property. A few years ago, the principal on the loan was just over $20,000. ‘A lot of people will tell you, ‘You knew what you were signing,’ Hicks said. ‘That is not so.’”
Let’s see: 39 years in the same residence, only $20k left on mortgage and the new mortgage is $412k? For a children’s discount uniform business?
If is smells like fish…
To me “discount”, “children” and “uniform” does not add up to a business that would be worth sinking $400,000 into.
‘A lot of people will tell you, ‘You knew what you were signing,’ Hicks said. ‘That is not so.’”
Whatever this woman was up to, not understanding the loan docs is not likely the problem. That’s north of 370k she pulled out of her home…if I were her lender, I’d turn this one over to a forensic accountant.
She is smart enough to get ACORN to take her on as the Oakland “face of the subprime mortgage crisis”? But not smart enough to understand the loan documents she was signing that increased her debt by $400K?! I think not.
Yes, somehow there’s a big piece of the story missing here. Why would a 74-year old woman start a children’s uniform business, anyhow ? Maybe she has some kids who convinced her to sign some papers and then blew the money on drugs, sex and rock-n-roll ? She’s fronting for somebody, I think.
And if she isn’t, her business sense is so pis$ poor she should have stayed out of the “children’s discount uniform business”, whatever that is.
Poor girl probably had business cards printed up - and even ordered some really bitchin’ monogrammed pens too!
From google it looks like Oakland school district has a mandatory school uniform policy so I guess that was the business she was suppose to be getting into. However I would think that you would want to start out small in that kind of business and build it up, not go deep into debt before you know if people will buy.
Couple of things
She could been in production and then not been able to close with the jobbers. There is a big CMT house in Oakland and they are pretty expensive. You only use them if you are doing a specialty line like extreme mountain gear (they are the contract house for a local co. in Berkeley which can afford them, barely).
This woman could have gone to them to produce and been completely reamed in labor costs per unit. She probably has no idea what 30/30/30 ratios are and just picked the CMT house out by a quick scan in the phonebook. I’ve seen other now defunct companies do this over the years.
There was a time that locally produced clothing was a viable industry but we’re too addicted to inexpensive lines produced in asian countries. Unless Miss Hicks was prepared to produce in volume or she was going to run it as a sweatshop in her home, her plan was a no-go from the start.
So much can go wrong in textiles. That’s why you hire an industry management veteran for the first few years.
I actually live in oakland and have small kids. Happily i can afford to send them to a private school as the OUSD (= public schools) are inefficient, dangerous and corrupt. RE mandatory uniforms, not (most?) schools do NOT have them. I suspect most don’t. Doing some math, 58K kids in the oakland school districts x 25% (say) require uniforms = 17K uniforms uniformed kids a year x 1.5 uniforms a kid a year = potential market of about 25K uniform sets a year. Assuming average uniform is 50. (can’t be more as most kids in Oakland schools are poor), you have a market worth 1.25M a year.
Margins on this can’t be high as, again, kids are poor + she is after a discount business + won’t look good to rip off kids so let’s asusme that margins are 30% (ie, 35. cost for 50. uniform). 15. margin, pre overhead, 25K uniform sets a year = 375K a year business. Not bad, yet ONLY if she gets 100% which she wont as poor kids parents will spend something on clothes if they have to + charitiies will chip in to sell clothes at cost + others will just GIVE uniforms a way. Best case, she gets 10% of the market or $37,500 a year pre overhead …. YAWN, bart station agents make more than that.
Something definately fishy
You guys are being too hard on Miss Hicks.
Kids need more than 1.5 uniforms per year. How many outfits do your kids own, Finance Guy?
How can a small business owner afford to hire an “industry manager” (probably to the tune of $150k) for the first few years?
I agree that her kids/grandkids probably ripped her off. She’s old. Old people have feeble minds.
Also, you can usually buy uniforms at Wal Mart. Another option that wreaks havoc on the above mentioned business model is, at the academy my kids went to, my wife was chairman of the “recycled uniform” program where parents donated the uniforms that their kids grew out of. They were available for FREE to any parent that wanted them…usually almost new condition, especially in the lower grades (smaller sizes).
Uhhh…probably school uniforms–could be quite lucrative. Your clientelle has enough $ to send kids to private–need lots of clothes. Her story does sound fishy, however.
I expect the reporter fell down on this one. [bias?] A bit of diligence would have turned up at least that she emptied her equity and is upset the she can’t go back the seemingly bottomless sub-prime well.
Yea, there’s a huge hole in that story…
Took the words right outta my mouth, Graspier.
Well Ms. Hicks, I think you better start looking for an apartment. You should be able to find an affordable one near the city dump or above Ned’s auto repair.
$20,000 left? What the?!
“attempted”(?) OR already pulled money out. - Artcle needs to make it clear.
Start a business at 74? - Sell the house and live the rest of your life living.
“said she attempted to pull equity out of her home to start a discount children’s uniform business.”
I missed this the first couple of reads but now the word ‘ATTEMPTED’ really jumps out. Attempted to pull out equity to start a business does not mean that she pulled it out to start a business. Sounds like she pulled out money for a good life and someone is spinning this story. In 39 years she hadn’t paid off the house? Damn, the house probably only cost $20K 39 years ago.
–
Back to the future that would be ugly. Many parts of CA would be hellholes. Bubbleheads are not known for rational behavior.
Mark down Silly.con Valley as one of the hellholes. 10%+ of the population there has lived on home equity for the past few years. When the total employment falls 30% from the 2001 peak it would be one of the leading Debt Concentration camps.
Jas
Concentration camps
Still fighting WWII, eh Jas? I’ll bet that the net amount of debt in California falls for years, as these FBs walk away.
I’ll play a little contrarian hear even though I acknowledge the real estate market here has turned rather dramatically… I believe all my bi-monthly posts have acknowledged this….With that said, I am telling you this, money is pouring into this valley right now….”BIG MONEY”……”NEW YORK KINDA MONEY”….I am seeing 25 year old tech buildings 200,000 sq. ft + being torn down to build new state of the art facilities…..Google just purchased a entire school site to provide day care for their employees….Even REIT’s are moving down the food chain ladder and purchasing smaller & smaller buildings….Most recent I observed was three 22 unit apartment buildings….Unheard of years ago….Just no economies of scale in that kind of purchase by a REIT….We are going to take are hit on the residential real estate side and IMO fully justified….Prices are just way out of line….With that said, barring a black Swan event of some kind I think we will weather this just fine….Just my perspective for what its worth…
Hi SC Dave:
I see vast swaths of empty retail space with “for lease” signs all over San Jose. Can’t get away from it. Unemployment is on the rise in Santa Clara county according the Mercury News.
New York kinda money is Wall Street money. We don’t have that here. We have start-up money. It’s different, it’s incestuous. It’s the same small group of people recycling one another’s money in and out of stupid, bound-to-fail companies that employ and dump Silicon Valley residents so predictably that nobody will even accept a 401k that takes longer than 6 months to vest anymore.
RE here is going down, and will take a huge lump of artifical wealth (and uppity feelings) along with it.
> It’s the same small group of people recycling one another’s money
That’s why they’re called Silicon Valley circle jerks. All these companies just want to get bought by Google or Yahoo, or whoever has spare stock at the moment.
scdave,
Are you channeling LVlandlord?
–
Ben,
First 3-5M will “Walk Away!,” but as depression deepens 15-20M of real “homeowners” will go thru the payments, hoping to hang on, until they are financially bankrupt. There will others who would be bankrupt not because of RE. All in all, I predict 30M financial deaths causes by the Debt Concentration camps in the US alone. The worldwide toll could be 100M.
Yes, I have no doubts about the deflationary depression during 2008-10. This period would make 1930-32 look not so bad in comparison.
It Is the Debt, Stupid!
Jas
Jas, I hope you are right. I would love to Silly con Valley get the a$$ whipping it deserves. It is such a joke what people are and were willing to pay for crappy old homes there. I think the whole dot bomb bubble made people there completely lose touch with economic reality. Let it burn.
It’s the misuse of language that Ben is highlighting. People were butchered by the millions in concentration camps. In no way is a description of a swath of underwater FBs in Silicon Valley using that term anything but intellectually dishonest.
spike
you’re joking right? have you heard about figures of speech?
mmG,
Not joking. If you hate the brain-dead hyperbole of Lierah,
Watts, Yun and Gin, then to see the same brain-dead use of language by posters on this blog is insulting.
Whether it’s Boers, Jews or Armenians, their fate is not related to those of jerk-water FBs.
I think the word was first used during the Boer (sp?) war in Africa, early 20th century. Also applies to the japanese internment here in the USA. Not just a Nazi phenomenom. Soooo, while perhaps not the greatest comparison, it should not be considered anti-semetic. Not like he said the FB’s are going into the showers and getting the gas. I think that was someone else a few days ago.
On October 17, the Chief Economist and Vice President of the California Association of Realtors, Leslie Appleton-Young, spoke to the Palos Verdes Peninsula Association of Realtors.
She made an outstanding presentation that I would like to share with you. To view the PowerPoint slide show, just go to my website at http://www.xxxxx then scroll down to the bottom of the site under “Articles & Links” and click on “Cal Assn of Realtors Economist Presentation”. You will find projections and reviews on sale volume, prices and more. It’s a great presentation and I hope you will take the time to review it.
Meanwhile, on a more microeconomic scale allow me to share with you my own projections for the Palos Verdes Peninsula … bottom line … the light you see at the end of the tunnel is definitely not the lights of an oncoming train, but rather of daylight! There is strong elasticity in our market place as we can see from the chart below that while prices have decreased about 8 or 9% since the peak of early late ‘05/early ’06, the fact of the matter is that DEMAND (measured as sale volume) has INCREASED by about 40%. With demand responding so well to slight price changes, we would expect that price stability will follow and form the base of a stronger market in the not too distant future. Clearly, we don’t buy real estate with timing models that we might use for stocks and bonds and there are many different motives to buying in any market cycle; that being said, I believe that as a result of the current dynamics in process, buying decisions between “now” and the next few months will be wise ones.
Thanks for taking a look at this material and remember, if you can think of anyone that could benefit from my services (buying or selling residential/investment real estate or using my “Listing Informer” Service or receiving my Monthly Newsletter) please call or email me and let me know. Feel welcome to forward this email to your friends and colleagues! Thanks again!
I redacted web address for this agent. zip for this area is 90274
StanleyJohnson. This is a joke posting, right? If it isn’t I’ll address the post.
There is NO pent up demand at these prices except in the crystal ball the NAR uses and we know how honest and reliable that crystal ball has been. There MIGHT BE a pent up demand when prices go back to 2000 or even 1998 but until then only GF’s will buy. Here’s four very simple reasons why prices will drop to that level.
#1. Affordability. There’s not a snowballs chance in hell that the majority of these properties will sell at these prices or even with another 30% or 40% off ESPECIALLY now that sub-prime is dead. Banks and lenders are going to look at borrowers finances and credit history with a microscope from now on AND they want a big down payment to protect their butts against defaults.
#2. Inflation. It’s not running at 2%. It’s running at 7% + on my inflation model and it’s going to get worse. I don’t care about Helicopter Bernanke or Godfather Paulson of Wall Street’s version of inflation. I stopped taking those shills seriously a few years ago. My inflation model is a lot more honest than the one used by the government and the Fed.
#3. Wage stagnation for the MAJORITY in contrast to inflation. Many, many other factors are eating away at the average American’s incomes which means less left over for mortgage payments. The gorilla in the room called healthcare is just one.
#4. Inventory. A lot of grossly over priced inventory. Underline the word GROSSLY. Those prices were reached NOT by stable, steady demand by borrowers who felt they would like to get on the property ladder. Those prices were reached by outright fraud by realtors, brokers and appraisers and made worse by massive speculation creating a very unstable BUBBLE which has now burst. Before ANYTHING happens to bring in buyers into the market who are NOT GF’s, that festering sore has to be cleaned out. THAT means eliminating ALL fraudulent action which took place from 2000 to 2007. All price increases prior to 2006 are FAKE. The value placed on property in those seven years is FAKE. 100% FAKE.
If you are a realtor, I would start looking for another job ’cause it’s gonna be a looooooong wait before this mess is over. Look for 3 to 5 years before prices bottom out followed by several years of flat prices.
Here’s a look at the future UNLESS we get good government which is highly unlikely even if whoever gets in is better than this government which is going to go down as the worse government the US has ever experienced. It has been reported that China is having problems manufacturing chopsticks. Because of China’s rapid growth, there isn’t enough wood. On the other hand, the USA has plenty of wood in places like Oregon. So it looks like the USA can manufacture chopsticks for the Chinese and they can manufacture cars, tv’s, toys, drugs, computers and other electronics for us. Using cheap labor which has replaced good paying American jobs. THAT is where we are headed and workers making chopsticks cannot afford $700,000 houses.
Great post, Mike.
~Misstrial
Agreed. Great work mike.
That “light at the end of the tunnel” is not a train. Because the train is going over a cliff.
I’m sorry to be negative about your “good news” because the real estate recovery is a long, long way off. Please do not be part of the problem by deluding people into thinking this is a temporary “blip” or a “bump in the road” before we get back to business.
The real estate market is broken. NOT so much because of never-ending price increases, but because there is no equity left. It was all taken out and spent long ago.
In fact, we should be getting ready for some kind of Crash, on par with 1929.
The figures are all there. I’ve read that mortgage statistics.
Hey - they said to feel free to distribute the info - so whose the agent?
stanley, can you post that presentation?
I’d like to see that big increase in sales volume…could be an anomaly…there aren’t many sales on the peninsula so just a few more in a month can skew the #’s
prices are still going down no matter what
Stanley, don’t you know that Leslie Appleton-Young is a joke on our website?
snake oil salesman
“Bay Area homes sales sank to a two-decade low in September, as tighter lending standards walloped an already-declining market. It was the slowest September since DataQuick started recording statistics in 1988 and the 32nd consecutive month of declining sales.”
36 months ago was three years ago October (the tenth month) of 2004, which implies the market started slowing four months later (32 months ago) in February 2005. That is one very long and persistent period of steadily declining sales!
P.S. I would venture to guess that 32 straight months of steadily declining Bay Area home sales is the all-time record. I would be interested if anyone can come put with evidence to contradict this working hypothesis.
32 straight months…that’s gonna leave a mark!
It’s Time For The Banks To Face The Hangman
How bad is it?
…An article in yesterday’s Financial Times said that, “Only $9.9 billion of home equity loan securitizations have come to market since July 1—A 95% DECLINE FROM THE $200.9 BILLION IN THE FIRST HALF OF THIS YEAR AND A ROUGHLY 92% DECREASE FROM THE SAME PERIOD LAST YEAR.”
The banks are in trouble. Big trouble. Main sources of revenue have dried up overnight and they’re stuck with hundreds of billions of debt…
http://tinyurl.com/34pyyf
IMO, the revenue is there, just not willing to buy junk at their prices (the problem all around — from houses to SIV investments). Time to drop prices/increase yields and the market will “magically” begin to work once again. Why is it so difficult for sellers (of everything) to get that?
‘92% DECREASE FROM THE SAME PERIOD LAST YEAR’
It sounds like U.S. housing prices don’t have much demand support going forward from the subprime mortgage lending kingpins. Buy now and catch yourself a falling knife.
I think it was Palmetto who was “bidding” 13,600 today….do I hear 13,500, anyone??
Yeah, that was me. I got my wish. You’re up next, Blano. This is fun.
366 down. Do I hear 400?
But if it goes back up 300 next week then it’s a waste of time unless you’re txchick or someone else who can trade on this stuff.
I bet Tx is laughing hysterically, drinking wine with her feet up, and awaiting phone calls from “old friends” about how they aren’t going to get their much needed bonuses this year.
Nah, got into some pissing contests with a few bozos who think there’s going to be a gonzo rally at year end.
I don’t care anymore. My year’s in the bag and I still have half my puts. If it goes back up, I’ll be pleased to buy the other half back. This is toast.
So many times this year I have been sure that stocks will take a dive, only to watch them recover the next day. Wall Street types always seem to find a way to BS stocks higher.
It’s different this time.
Market down 340 as of 12.50 PM Ca. Time .
I guess the stock market is not always going up any more
Looks like it’s going to be down 375 for the day . We all knew it was coming .
On CR they were posting rumors of shake ups and special board meetings at Merrill.
The dollar is now 69 Eurocents.. I hear a great flushing sound
The ABX indices seem to be the ‘leading indicator’ for DJIA/SPX/Nazz. Been in a free fall the last few days and today the reality sideswiped Wall St.
You might say Wall Street has been mauled by the bears.
Bernanke put is at Dow 13250.
Owned her house for 39 years.
Mortgage payment over $3,100 per month.
Now owes $412,000
Principal a few years ago was $20,000.
Tried to take equity out of her house to start a business.
Observations.
This woman is going to lose her home. If she only owed $20K on the house a few years ago and now owes $412K, she has been using her house as a piggy bank.
And the piggy bank is now broken.
She tried to take out more equity to start a business, but this time her credit line was maxed out.
This woman has obviously been doing this for a long time. There is NO way, not even with the most predatory lending, that the balance could go up that high. She’s probably done this time & time again.
If she’s been in the house for 39 years, she’s probably older and there is no way she can make her payments.
Starting a business.
First of all, 95% of all business fold within the first 5 years of existence. It’s tough to start a business nowadays. But why do people risk their homes in order to go into business? I’ve read several articles where lots of homeowners have done this.
Is it for some reason prudent, just because it’s “business”?
If you’re going to start a business, go out and get financing. DON’T use your house as a Venture Capitalist. The SBA has all kinds of programs where you can get financing.
Better yet, start your business “small” and let the business grow incrementally from its own profits. Grow gradually.
Even in business, you don’t need to incur a lot of debt. Especially not risky stuff like starting a children’s uniform business.
What the H*** is a uniform business?
I started a business with very little capital not because I was prudent but because I had no other choice. Also, I despise debt. Things are going well.
I answered this above a little. Starting a clothing line is about as risky as it gets.
I tried to bail a local firm out, came in to clean them up and make them profitable. Even got features in Business Week, Elle, and some smaller fashion nationals. Long story short - CEO was a young idiot and I walked, with my contract bonus in hand, in cash only.
“What the H*** is a uniform business?”
In many school districts in CA (Oakland included), students are required to wear uniforms to school. In my area, this basically means a white collared shirt and navy blue pants. We actually see local big name retailers such as the Gap promote these clothes at the end of summer.
A good friend of mine pulled $300k out of his home in OC to start a business that has now flopped. He is now probably underwater, but can’t bear to admit it.
Basically, it’s all about (i) the culture of consumption, and (ii) people just not wanting to have a job anymore. People have always looked for get rich quick schemes, always looked for ways to stop working for the man, it’s just that until recently, banks were not so foolish as to loan money to just anyone without solidly valued collateral.
And of course, with working hours among the middle class edging up year after year back toward pre-FLSA/pre-union hours, such that half of the people I know now work not 40 hours a week, but 50-60 or more, it’s not hard to imagine why people will go way the hell out on a limb to try and get off the treadmill. It’s time for our culture to hit the reset button, the only question is whether this will be it.
JimatLaw,
I run my own business, and i started from a very small base, and it has grown incrementally with zero debt. So it is indeed possible. I let the business feed itself. But the hours do suck-50-60+ easily. Of course, I would never want to work for anyone else again, i prefer being my own slavedriver.
Indeed, I think that’s the way to go. Better to decide not to cut yourself a break than to have someone else decide not to cut you one.
It’s not just “now a days” in regard to being tough to start a business. I got my Business degree back in 84, and the standard figure was 6 of 10 business starts folded in the first year. Of the other 4, 3 lost money. That was 23 years ago. It has always been tough to start a SUCCESSFUL business.
“Better yet, start your business “small” and let the business grow incrementally from its own profits. Grow gradually…”
best post yet on starting small and building up a business from the ground up! Lots of folks start their own business doing what they like and with very little capital, sometimes just a couple grand to start. I had a business-Sandwich diner-in the 80’s, my first major venture. I overpaid on it, though it was a solidly established operation with decent returns. Too much invested from the start and overhead was very high-got out of it after 6 years and ended up BK.
Experience is the best teacher, even in failure. I learned after that never start big. Always small and build up. Have a solid well-thought out business plan, and emergency backup savings(reserve capital) as the first 6-months or even 1st year you may be losing money till your business slowly takes off through building up clientele/customers/goodwill/word of mouth.
Start small, do what you enjoy and have a talent for. Basic rules for launching a small venture. And don,t forget to pay the taxes. If you don’t like keeping books, detailed tracking of expenses, and doing dull bookkeeping
you will fail.
Mornin all……….yikes!!!!!!
What the heck have you done to Wall St?
Damn. Don’t think we are getting to 500 on the Dow. So much for history.
Now all we need is for some Bush Administration to make an idiotic comment over the weekend (about the dollar, perhaps, like 20 years ago?), however, and we might get another Black Monday.
We abducted the Plunge Protection Team, that’s what!
Wall Street got a footie up the wazoo.
Just warming’em up for the Joshua tree.
Wall Street caught the SIVs from that skank Goldilocks.
motor mouth maria B is having a meltdown on CNBC
Here is a letter the friend I was visiting in the LA area. I am acquainted with these people. They bought a 900 sq ft home in a blue collar area within the LA county area. They paid $150K for this home. They obviously did a refi and frittered over $200K away. They are nice people that lived larger than their job incomes (middle age couple, no children probably earning 35-40K each). The husband’s car was stolen last week. Any comments on what they can do? My thought is to just get up and walk away after living without making payments as long as they can and save some money.
Hi D
>
>Well, I think R will be driving the PT beginning Monday, since he
works the late shift, that’s the only real solution we have. I can get rides home with K, as we both work the same shift, or since it’s still light when we get off I can always walk and begin my new walking program! LOL R would just have to take me to work in the mornings, but since I only live 2 miles away, that wouldn’t be a problem. At this time there is absolutely no money for another car. We are dealing with a very serious mess with our housing situation, as we are involved in the mortgage meltdown and those god-awful sub-prime loans that we got in to months ago. Of course we were told that our payment would only be xxxxxx, AND they failed to tell us that this was one of those Negative Am loans where if you are only making the minimum payment each month (which we are) that the balance of the payment is ADDED to the balance each month! So, you know what we are dealing with now….Our
original loan was for $380,000, and as of last statement it is now
$395,000! Yikes! We are in deep trouble……I would hate to lose
this house, but we can not afford the payments that we are supposed to be making right now. It’s very scarey, and I have been carrying around this burdon of worry for many months now. I have to get our papers ready to take to our mortgage company and see what we can work out. So, as you can see there is no money in the pot for another car anytime soon….
>
>L
2 miles?! 20 minute walk, 5 minute bike ride. Really, anyone traveling by themselves who lives within 7 miles of work should be seriously considering the bicycle.
I can see how manufactured (”constructed,” “mythical”) needs become so necessary for people. As far as the house, they should try to sell it with a loball listing price and get a short sale from the lender. Pay the taxes, move on. Forclosure is also an option, but not a very ethical one.
Hi PU:
Just pointing out that LA is not a safe place for women to be walking/riding around unescorted.
Ah, but they can always be escorted by Smith & Wesson if they’re not small-purse types.
me likey smith & Wesson
I find a bit of enjoyment in reading about the housing market fall, but I will admit to feeling a bit sad to see individuals go through the financial hell that they have created for themselves. As they say, “when one finds oneself in a hole of one’s own digging, it is a good time to inspect the quality of the workmanship.”
It sounds kinda like what I told a friend about his brother, which he wasn’t expecting to hear: “your brother has already lost his house, he just doesn’t know it yet.” But the reality is starting to sink in for all involved.
I’m both ways about feeling sorry for people in this situation, but I find it hard to believe she didn’t know that stuff.
“…see what they can work out.” - let me field this one: NOTHING. There is NOTHING to ‘work out’. It’s over, start packin’.
The husband’s car was stolen last week.
Uh, how about introducing them to the concept of “car insurance”?
LOL debt concentration camps. Hey now THERE’s an idea. A “final solution” so to speak to the F’d homedebtor’s financial problems. I can see it now - gas and torture chambers by Ikea…
The beds will be granite counter tops, stainless medical experiment chairs….
MA bailout update:
BOSTON — With the home foreclosure crisis expected to worsen, state lawmakers moved yesterday to toughen regulations on subprime lenders and offer homeowners new financing options to get out of trouble.
The House approved legislation requiring all loan originators to be licensed, to have the Division of Banks track foreclosure trends across the state, and give homeowners a 90-day grace period on overdue loans. The vote was overwhelming, at 148 to 3.
Mortgage help hot line
Gov. Deval Patrick has set up a hot line - 1-888-995-HOPE - for people with mortgage problems. It will be operated 24 hours a day, seven days a week by NeighborWorks Center for Foreclosure Solutions and will offer referrals to nonprofit agencies for counseling.
At the same time, Gov. Deval Patrick released a pilot plan to stabilize neighborhoods in six cities, including New Bedford, that have been hard-hit by foreclosures. The other five cities are Lawrence, Boston, Brockton, Springfield and Worcester.
http://tinyurl.com/28epdj
After 911, there was a problem with the rescue dogs getting depressed because all they ever found was dead people. After a while, you couldn’t even get em to go out anymore. I think we’ll see the same phenomenon with foreclosure hotline operators. They’ll have to plant fake debtors who will magically find a solution over the phone just to keep the operators from quitting.
“requiring all loan originators to be licensed”
I wonder if that includes those who are lending their own money. Good to know I don’t need to consider doing business in Massachusetts, the worst state I ever lived in.
BTW, I’m in a very schadenfreude mood today. Anyone else? Wish I had shorted the Dow…
Hoist a few for the pig men this weekend everyone. Gorgeous fall weekend for the Midwest - not so nice back East.
Query: If a developer improves ag property with curbs, streets and power, do the property taxes go up (from agric) right away? I’m wondering if the development across from me will end up being taken over by the city. The land was actually platted over 20 years ago and they just now got going on it but no one’s buying.
Depends on the area. In Texas, the developer is reponsible for 5 years of back tax differential (the “rollback”) when agricultural land is converted to another use. This is a pretty significant expense, as the difference in taxes in Texas would be around 2.5% of the assessed value (which also increases). For a $1 million pre-conversion piece of land, you are probably looking at $200k in tax rollbacks if this were in Texas.
Looks like the talking heads on the business news are now predicting 100% chance of BB cutting rates because of todays fall in the stock market . Looks like people are starting to see the elelphant in the room . What ever happened to global markets being strong ?
Well, as long as the stock market always goes up (which it always will because the Fed always will cut rates if it does not), global markets will remain strong.
I’m confused… how do you cut rates with the US dollar swirling down the toilet bowl, real inflation well above “the comfort zone”, and foreign investors running for their lives?
The same way they did it last time; move your assets out of dollars and cut.
You know, we predicted all the nasty things that would happen if they cut and they still went ahead and did it. We were right, too, but that just means they may go ahead and do it again. If so, get into GLD immediately.
“‘I wouldn’t be in a hurry to buy. You can wait over 6-months, a year, even two years, and we’re still going to see those lingering effects,’ says Thomas Davidoff, U.C. Berkeley Haas School Of Business. ‘For the inner Bay Area the worst is yet to come, and it’s going to be best for buyers.’”
This guy’s going to have to hire a bodyguard.
The dark side of affordable housing.
Although many decry the NIMBYs in CA, many of us have seen what many “infill” projects and “affordable housing” developments can do to an area.
Not sure what the answer is, but I think it would be wise to spread things out a bit develop SFHs with small guest units which could be rented out. That way, there would be more rentals available & the LLs might have a greater incentive to take care of the rentals & stay on top of what’s going on.
I’m not a NIMBY! I don’t want them anywhere
“‘We were all pretty stupid,’ Chadd said.”
Yes, starting with your decision to attend a “Wealth Building Expo”, Do you have a tattoo on your forehead that says “Sucker” ?
“were” all stupid..?
Fear and Loaning in Natomas: A Savage Journey to the Heart of the American Dream
“Lena Abello, her brother and two friends stood poised to buy their first home together last month – a $303,000 single-family house in Natomas. But the shake-up in the nation’s mortgage industry abruptly shuttered their dream.”
“‘The day before we were to open escrow, my lender called and said the program we were about to qualify through was no longer available,’ said Abello. ‘She said we were no longer approved for a loan.’”
“But that plan is now on hold. ‘I had to call the (San Francisco) owner and tell her the bad news,’ Abello said. For now, she and her friends will remain renters.”
Why didn’t you call her and tell her to knock $40K off the price and then try getting the mortgage again ?
Back then the region was in a housing boom.”
“These days, it’s foreclosures that are booming.
Really? And just who could have seen this coming?
We did! We did!
Foreclosures haven’t even begun. The shear number of people who lived “the good life” off HELOC extraction astounds me. Many of “those people” live in the very neighborhoods where “its different here.”
Awareness is dawning among the population, but we’re still in fear. Yea… a year ago I would have predicted a further acceleration; now I think we’ll just take some time.
So the question is, how low can home sales go? ~4.6 million sales per year is the long term trendline. I think we’ll undershoot. For 2008… 4 million sales per year is my prediction.
Got popcorn?
Neil
Dow Plunges 366 on Recession Fears- AP
http://tinyurl.com/2rewzk
I stand corrected. The stock market does not always go up. But the stock market still always goes up, in the long run. Buy the dip.
More S & P downgrades. Hard to keep track of this stuff they’re downgrading so fast.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a47IJsAZLTZQ&refer=home
“…and bank foreclosures at an all-time high…”
Lines like this crack me up, reporters should do more research, the party has just begun.
mrincomestream,
It seems you have a very good grip on this housing situation, just how bad do think it will get?
I really think it’s going to surpass all our expectations. Far worse than what you or I could imagine. Housing is in unchartered waters. It going to get far worse before it get’s better. Nobody has marked anything down to market and one of the reasons I believe is no one knows how much to write down for fraud. So right now it’s just a big hot potato game everybody pointing fingers but deep down realizing that everyone was equally criminal. When you mark down for fraud then you mark down to what it’s really worth plus being in a declining market. You have a very dismal picture. Compound that with a declining dollar and 100 bucks a barrel oil…well you get the picture. No amount of legislation, bail out or any other band-aid measure is going to be enough and even if it is would the American people go for it.
A lot of confusion out there, I really expect the potato to be dropped and the toilet flushed wiping out a lot of paper gains starting 1Q08.
It’s going to be real messy, and the longer folks hold out with silly comments like ” I don’t want to give it away” the bigger the pain.
All of the people I talk to these days really should just mail in the keys and get a rental. I don’t tell them that, but they should…
One good business idea:
Selling tiny envelopes just big enough to hold a key.
MIS,
LOL! I still think it’s funny how you’ve changed after that party you attended some time ago. You’re really quite the bear these days.
“…and bank foreclosures at an all-time high…”
Gee, one can read this that your crystal ball tells you that ‘banks will be the next foreclosures’.
Please disregard anything you read or hear about this so called “housing bubble” here in the Bay Area. There is no such thing! This is the Bay Area for God’s sake! It’s different here, everyone and anyone who doesn’t live here wants to or is envious of us for our wonderful weather and all the awesome things there is to do here. We make soooooooo much more money than everyone else the price of a house doesn’t matter because everyone makes 100k or more a year.
As for the hogwash about investors owning a significant portion of the housing stock…check the internet….that’s an urban legend!
The Bay Area is special and immune from the housing bubble, there is no such thing here. Just ask any family, they’ll tell you……it’s fricking awesome here and any price to live here is never too much!
Looks like I picked the wrong week to quit sniffing glue!
Shirley, you can’t be serious?
And don’t call me Shirley!
“Shirley” you started happy hour early….
If the “Bay Area” is just Palo Alto, Menlo Park, Atherton, Los Altos, then things will probably fall less there than, say, in Sacremento! Maybe 30% instead of 70%.
The difference is there’s fewer homes bought by “investors” in these areas. Most folks actually live in the homes they bought.
Of course, when the MSM says “Bay Area” they include places as far out as Stockton and Pleaston, and cesspools like Fremont.
This too is an illusion. These prime areas started much more expensive and will still be expensive after the reversion, but a careful look shows inventory already to pile up all around Stanford and pricing relative to historical norms is around 50% too high. Prices will have to come back down, but because housing markets are sticky and turn like supertankers this will take years. People are not good at taking inflation into account, and that is how stagflation works its magic. In the last downturn inflation turned price corrections of -1% to -3% per year and turned them into -30% or better in real prices. This time should be the same time but there is farther to fall and the process will probably take a lot longer.
Oddly enough one of the big differences between us and Japan is our bankrupt institutions and households will be dispersed instead of being allowed to continue on in a dishonored state.
Maybe the Guns and Butter madness of our current government will result in high enough inflation for this to be mercifully quick. We live in interesting times to be sure.
But you see there are many Bay Area owners who used their equity to buy “investment” homes in places like S. Cal, NV and AZ and the vacation home in Tahoe…it’s NOT different here.
“‘The business decision is more of an advantage to sell at a discount and lose money than wait 12 months on a market that might improve,’ says Bartels.”
Actually, builders probably are smart enough not to chase the market down - they’ll unload their inventory and get what they can at the higher end of the downturn. Perhaps very smart - certainly smarter than regular sellers or potential sellers who are looking for the music to start playing again next year or 2009. What they are in denial about is that once the prices stop falling, they will be stagnent for anther 4 to 5 years before returning to regular appreciation of about 1% above inflation. That will only be prevented if the downturn is severe. The slower the downturn in prices, the more pain will be caused as sellers are tempted to wait for things to turn up again.
He got it. But the many worst-is-over-recovery-next-year believer still have to go through a painful learning curve.
The name of the game in the US for several years has been” Hiding the Ball” or the PEA.
You can call the “Ball” the truth, real debt, Federal Deficits or the true cost of homeownership or whatever.
Everybody from RE agents, the media, the Gov’t, NAR, to Wall Street are experts at shuffling the BALL under some grandiose guise of a bunch of friging walnut shells.
The latest version to pick peoples pockets is the FED sponsored structured investment vehicle CONduit BS bailout.
We don’t live in America anymore, we live like a bunch of LOST PEAS in a constant CON Game
“I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. As a result of the war, corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavour to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed.” Abraham Lincoln - 1865
Honest Abe is definitely rolling over in his grave about now. All that hard work for nothing!
That’s exactlty what I feel like. A pea lost in my own pod.
“So what’s a homeowner to do? Sit tight if you can, and wait for the market to settle, advised Brian Sharp of Sharp Realty in Brentwood.”
“‘I’m telling clients not to buy right now if they don’t have to,’ he said. ‘Uncertainty kills the market, and I believe in the last couple of years greed and bad loans have contributed to the decline of the market, and buyers are scared. What I’m seeing a lot of right now are short-sales. Things are definitely slow.’”
So you’re saying that if nobody buys and nobody sells, then the prices can’t reset and everything will be fine? Nice!
“…if nobody buys and nobody sells, then the prices can’t reset…”
Sounds very similar to the SIV Superfund strategy…
“I’m telling clients not to buy right now if they don’t have to”
Hmm, since nobody HAS to buy, I guess he has zero commissions. Somehow I don’t believe him.
OK, who wants a Bay Area Housing Crash dinner next month? Mid-November.
Whad’ya say?
What date? I am in SF for Oracle Open World.
Me too…. I’d like to go as well!!
I’m also at Open World (Nov 11-15)…. I’d like to go as well!!
And I want one of those here in Tucson. Anyone care to join me at a local eatery or drinkery? We’ll meet at the “It’s Different Here” sign.
Slim, pls wait till Jan or Feb when more of us snowbirds will be unable to resist the lure of AZ.
I’m up for it (long-time lurker, occasional poster). I’ll try to keep an eye on the board in case you can get other people interestd
argh! I HATE typos. interestd = interested. BayAreaQT is local, HARM is too but is more of a Patrick.net guy I think, jbunniii puts up comments on the Comical’s real estate articles all the time, and Gwynster is over in Davis-land. Can’t think of any other BA regulars right now - I should go to bed…
you never Led me astray…
There’s a lender who’s sure
All those gilts were not Gold
And he’s flying a stairway to heaven
When he gets there he knows
Extradition is a no-go
With a word he can get what he came for
Ooh, Ooh, and he’s flying a Gulfstream V to
Heaven
The signs are obvious to all
But he wants to be sure
Cause you know sometimes worth has no meaning
In a seat, sits a crook
I’m a songbird that sings
sometimes all of our thoughts are misgiven
Ooh, it makes me wonder
Ooh, it really makes me wonder?
http://www.youtube.com/watch?v=lKg4g9zMeHI
Well I guess this thing is starting to affect my area, my neighbor moved out of her townhouse about 3 weeks ago bragging about how she’s sold it for 1.2M. Well, apparently that didn’t go through because it’s still for sale, now at 999K. Couldn’t happen to a better person, too.
home prices need to fall 35% so that median home price is 3 times median household income. the 2.5-3 times factor is mean reverting, so history says it will have to come down to that once again.
how long will it take? end of 2009?
Longer. I personally know too many people whose ARMs don’t reset till 2010 or later. They are holding their collective breath.
The concensus on this blog is that prices will fall 50% from peak prices in CA. Right now they’re about 10x incomes, usually 4-5, depending on how close you are to a beach.
The consensus is overly optimistic.
article on Christopher Thornberg in the Contra Costa Times:
http://tinyurl.com/yw6vlm
“The median single-family home price in Marin in September was $860,000, just shy of the $863,500 in September 2006, according toDataQuick. The median single-family home price in August was $1 million.”
That would be a 14 percent drop in the Marin County median in one month’s time. That translates into an annualized rate of decline of
((1-0.14)^12-1) X 100% = -84% (yawn…)
“‘I pulled up 30-something (nearby) homes at that price level of $356,000. Eighty percent were bank-owned foreclosures or short sales. That was huge.’”
“Forrester said the price impact was clear: ‘A year ago, (that property) would have gone for $400,000. A year and a half before that, it was $450,000.’”
Tentative conclusion: Prices in Walnut Creek are down on the order of (356/450-1) X 100% = -21% from their 2005 levels.
Actually, he was speaking of Oakley, CA. But heck, I can’t wait for things to become more affordable in the Creek…
“‘There is a very small group of unethical behavior out there right now, telling people to buy and sell regardless,’ said Sharp. ‘I say: do your job, serve your clients, but have some integrity. That’s the bottom line.’”
Wow… An actual realtor… Well done there Mr. Sharp. Well done.
The Modesto Bee reports from California. “A 133-unit condominium project across the street from California State University, Stanislaus, is in danger of falling through, leaving investors in the lurch. The landowner, Modesto attorney Ralph Ogden III, said low-income apartments are one of five or six options being discussed. ‘In the end, (condos) aren’t economically viable,’ Ogden said.”
“That leaves investor Michael Chadd, who borrowed to invest with Strategic Investment, very, very unhappy. Chadd bought a $100,000 stake in the condo plan. For the last nine months, he’s watched his money slowly drain away. What Chadd didn’t see and Strategic Investments didn’t mention was the sour state of the residential building market.”
“‘We were all pretty stupid,’ Chadd said.”
Hey, I’m feeling pretty smart. I read the HBB and as a result, I knew better than to throw away my money like this chap did.
(So how about us readers throwing some money toward Ben Jones, in thanks?)
thanks az_lender and Big V!
It will surely depend on availability and cost of credit. 2011/2012 might be right. there will be so many people retiring by then, many with downsizing and relocating to cheaper areas plans. that might help to put more downward pressure.